Stocks begin a new chapter in this bull market

Kevin Marder is a guest columnist and a co-founder of MarketWatch. He is
principal of Marder Investment Advisors Corp. and a contributor to
The Gilmo
Report. Previously, he served as chief market strategist for Ladenburg Thalmann
Co. and developed institutional fixed-income risk management software for
Capital Management Sciences.

Shares opened a new chapter last week in the nearly six-month-old advance. Up until then, the move had been led by value-oriented issues. There was rotation into and out of defensive sectors like the utilities and consumer staples.

Through it all, a few broad sectors showed outperformance, namely consumer discretionary, retail and financial.

But growth stocks were not among those.

For the intermediate-term speculator who seeks to hold aggressive growth names showing high relative strength, there was not a lot to choose from.

Eleven trading days ago, things began to change. There was a turn in sentiment regarding the economy. Institutional money began moving out of defensive segments like consumer staples, utilities and health care. The recipients were technology and, to a lesser extent, financial and energy.

The key development has been a ratcheting up of the speculative sentiment.

This means market participants are more willing to take risk than at any time since this six-month advance began. For example, the Nasdaq Composite, which has played second fiddle to the Dow Industrials and S&P 500, has consistently outperformed over the past fortnight.

The outperformance is more of a function of large technology strength than it is small-capitalization leadership (over past dozen sessions, the Nasdaq 100 is +7.8% vs. Russell 2000 +6.5% vs. S&P 500 +4.9%).

These reports have discussed the fact that recent new issues offer fertile ground for the momentum player. These can also serve as barometers for speculative sentiment. They can alternately break down right when the general market enters a correction, and they can also break out of bases to signify when the averages are on the cusp of a leg up.

Dozens are building and breaking out of bases. They signal a new leg up.

Ditto for the averages. It is almost always a positive for shares when the Nasdaq begins to outperform after a period of laggardly performance.

Among the names, Qihoo 360 Technology US:QIHU
was noted here last Thursday ("...looks interesting as it approaches the high of its eight-week cup. An aggressive speculator could use the Mar. 5 high of 34.90 as an entrance pivot with a suitable stop-loss in place to mitigate the risk of being incorrect.").

Monday the stock blasted out of its base on volume 364% above average. Price, up 8% on the day, went out near the top of the day's range, a plus. QIHU is expected to report earnings later this month. Speculators who hold the stock should be proactive and calculate how much they are willing to risk in the event there is an adverse reaction to the report.

Vipshop Holdings VIPS, -0.66%
noted here a week ago ("Aggressive speculators could consider an entrance above the Apr. 8 high of 32.48, together with a reasonable stop-loss in case proven incorrect"), cleared its five-week base on Thursday.

Volume was 37% above average, decent but not the overwhelming turnover that is preferred on such a key day. This may be due to caution ahead of the earnings release due out in a few days. Again, speculators should figure in advance the level of risk they want to expose themselves to. VIPS is up 596% since August, so the stock cannot be blamed for being a little less perky than desired.

Three D Systems DDD, -2.74%
moved up 40% since it was profiled here in December before breaking down amid concerns over competition in the three-dimensional printer industry. Since then, it has been off the watch list, but came back on the radar screen after it took out the top of a two-week ledge on Apr. 30. Of note was the day's volume of 125% above average on a 7% price rise.

Monday again saw volume rise to 35% above average and price this time moved up 8%. These are the types of hints that make it clear about the intention of large participants. For it is next to impossible for institutions to fully hide their footprints on the tape. When they come into a stock like DDD as they have on the two referenced days, it is usually a harbinger of further upward revaluation.

At present, it would be premature to consider an entrance. The classic, and preferred, course would be for price to pull back, forming a handle. This would allow for a potential cheater entrance, depending upon how far away from the base top a handle forms. Worth watching closely.

Elsewhere, Bonanza Creek Energy BCEI, -2.51%
is beginning to perk up again and should be monitored. Home-appliance and equipment retailer Conns CONN, +0.46%
is the No. 1 leading stock in the No. 1 leading group, and can potentially be taken above the Apr. 25 high of 45.18, the top of its four-week shelf.

In summation, a new more-speculative chapter of this bull market began to take shape two weeks ago, officially launching last week. This was underscored by shares ignoring last Wednesday's disappointing ISM number by rising the following day — the day before the April employment report. Once again, it pays to pay attention to the unexpected.

The views contained herein represent those of Marder Investment Advisors Corp. ("MIAC"). At the time of this writing, of the stocks mentioned in this report, Kevin Marder, MIAC, or an affiliate thereof held no positions, though positions are subject to change at any time and without notice. This information, which may have been previously disseminated, is issued solely for informational and educational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. Past performance of any security or strategy is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to MIAC, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position.

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